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Author: matt5 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5069  
Subject: FIRE checker for Fools Date: 8/13/2003 1:57 PM
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After reading the Millionaire Next Door three times ( I currently own 5 copies and give them as gifts to friends and family when they graduate from high school/college) it had a profound impact on my life. I think following the seven principles of millionaires covered in that book can drastically increase your odds of becoming FIRE. They are:

1. They live well below their means.
2. They allocate their time, energy, and money efficiently in ways conducive to building wealth.
3. They believe that financial independence (the FI in FIRE) is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.

The book explains in full detail each of these principles and how they achieved their net worth. And by the way, Fools, the back of the book lists the professions of those interviewed for the book. Among some of the surprising careers on the long list:

Accountant, ambulance service, auctioneer, citrus fruit farmer, geologist, horse breeder, janitorial services contractor, lecturer, meat processor, oversize vehicle escort service, trader, timber farmer.

Also shocking--> the impression I got from the book is that doctors and lawyers statistically have the odds stacked against them of achieving great wealth. This is due to their expected high lifestyle and status artifacts they are expected to own. The more I think about this, my son's pediatrician is probably only in her 30s and she drives a Lexus. Good luck, becoming a FIRE.

Anyway, the whole reason for this post is that I wanted to share with my fellow Fools a simple formula I've developed to evaluate how “on track” you are to becoming FIRE. Here it is…

At what age in life did you (and your spouse) achieve a net worth equal to that of your household income?

For example, if your household income is $60,000 per year how old were you when you had that much built up in your 401k, IRA, stocks, home equity, etc?

For some of us, it happens in our 20s, others in our 30s and so on. For some of us, it happens in our 50s/60s and some of us <sadly> never build up a net worth equal to our household income.

For me and my spouse, we hit it at age 27.

Now, what's amazing about this formula is that it has ABSOLUTELY NOTHING to do with your income, career or starting net worth. If you make $200,000 per year imagine how long it will take you to build up a net worth equal to that amount. Obviously LBYM and maximizing your investing will drastically speed up hitting that goal.

Here's an even neater concept I love sharing with co-ops/interns/recent grads in our office:

If you stick 15% of your salary per year under the mattress you will have saved up an ENTIRE YEAR'S salary in 6 years, 8 months. Plus, you will be accustomed to living off 85% of your income (from saving 15% per year). So, in theory, you could quit your job for a year at age 29 (assuming graduating at age 22) and have a BETTER lifestyle than to which you are accustomed (you'll have saved up 100% of your income, but you're used to living off 85%, remember?). Pick any age for yourself and this still works.

Now, here's where it gets really fun:

-invest it in stocks with a 9% annual return
-get a raise at any point during those 6 years, 8 months
-have a company that matches your contribution in any way

...and you can very easily reduce that build-up-a-year-of-income goal to a mere 4 or 5 years. Of course, in a retirement account you can't touch it until until 59 ½ or thereabouts, but you get my point.

Remember……..two quotes by which I live my life:

“It has nothing to do with how much you make, it's how much you save.”

“Invest until it hurts.”

And talk to my wife….she claims we've burn hurting for quite a while now!


Just my .02

Matt



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Author: phantomdiver Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 340 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 2:07 PM
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Of course, in a retirement account you can't touch it until until 59 ½ or thereabouts

Actually, this is not true. One of the glorious things about the REHP board is that it showed me (and many others) the miracle of substantially equal periodic payments, or SEPPs. The Badger is the guru of SEPP. Read his posts and you'll understand this principle, if not all the ins and outs.

phantomdiver

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Author: monica3674 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 341 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 2:33 PM
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Great post! It is nice to be reminded of the seven principles of the millionaires. I think I will copy them and post it on the fridge!

It is easy for me to get a bit envious of the new cars that most of my co-workers drive while I am driving my 93 Saturn. I have to remind myself that we're living frugally now and it will pay off in the future.

My DH and I also hit the net worth = income goal at 27 (we're 29 now). It's really kind of amazing how quickly your net worth can grow if you save and LBYM! Right now our gross household income is approx $110k and our net worth was $232k in July. Every 401k contribution and mortgage payment helps!

Monica

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Author: matt5 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 342 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 4:09 PM
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Monica,

Way to go! I knew I'd get great feedback and stories from Fools like you (and your husband).

And, by the way, you are MY HERO (Heroine?) for driving a 10-year-old car. Here's another one of my life's axioms regarding cars:

"Leasing allows people to drive cars they can't afford"

That's why leasing is SO popular!

Matt

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Author: FriedaChopsticks Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 343 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 4:27 PM
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Remember……..two quotes by which I live my life:

“It has nothing to do with how much you make, it's how much you save.”

“Invest until it hurts.”


Ooh, I like the first one, but as a person who often has trouble taking time to smell the roses, I'm going to pretend I didn't hear the second one.

I need to remember that there's a point where you just have to live your life. Yes, save for tomorrow, but remember that tomorrow is not guaranteed, so don't put off ALL of life's enjoyment until then.

There has to be a balance between uber-consumerism and being stingy and cheap. (Is there an -ism for that?)

FC

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 344 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 4:41 PM
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My DH and I also hit the net worth = income goal at 27 (we're 29 now)

The way it looks right now, I think I will fall a little short of having my net worth equal my salary before I turn 28 next month but I am pretty close.

dt

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 345 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 4:44 PM
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There has to be a balance between uber-consumerism and being stingy and cheap. (Is there an -ism for that?)

My DW does her best to balance that out for me! :-)

But you are right, it is important to enjoy your life along the way to FIRE. Otherwise you will be that grumpy man/woman that nobody wants to spend time with when you have all of the time in the world.

dt

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Author: ChocoKitty Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 346 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 4:46 PM
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Dumb question: when you do the net worth = income calculation, are you calculating it based on your current income or the income you started with? My income increased rapidly, but luckily I made my net worth equal to the current income when I was about 31 even with that increase.

If we're talking about net worth = starting income, I hit it when I was 29.

CK

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Author: FoolMeOnce Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 347 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 4:56 PM
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I must be a PAW. At age 16 using savings, I purchased a car worth $2000. and that was about as much money as I could make in a year working part time after school.

Regards,
FMO

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Author: matt5 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 348 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 4:59 PM
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ChocoKitty,

It's not a dumb question:

I meant equal to your CURRENT income, not starting income. Congratulations on you hitting both and btw I'm 31 also (if you are).


Matt



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Author: matt5 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 349 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 5:01 PM
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FoolMeOnce,


Fool On! Glad to see that you, too, are a fellow reader of the Millionaire Next Door.

For those who haven't read it....it stands for a Prodigious Accumulator of Wealth.


Matt



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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 350 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 5:01 PM
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Dumb question: when you do the net worth = income calculation, are you calculating it based on your current income or the income you started with? My income increased rapidly, but luckily I made my net worth equal to the current income when I was about 31 even with that increase.

If we're talking about net worth = starting income, I hit it when I was 29.


I took that to mean current income. If it was starting income, then I met that a few years back.

dt

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Author: ChocoKitty Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 351 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 5:04 PM
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I'm 33 now and still have a net worth above my current income. Now my goal is to get my net worth to twice my income!

CK

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 352 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 5:04 PM
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Fool On! Glad to see that you, too, are a fellow reader of the Millionaire Next Door.

Hearing the references to the book may inspire me to pull out my copy and give it a re-read. My parent's certainly fall into the category of providing economic outpatient care to my sister, who is a clear case of a UAW (I think that was the term was it not?).

dt (needs to read this book again)

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 353 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 5:09 PM
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I'm 33 now and still have a net worth above my current income. Now my goal is to get my net worth to twice my income!

Woo-hoo! I have a spreadsheet that I use to track my net worth that I update on the 1st of the month (or thereabouts) so I think I will add in a little section to incorporate a net worth goal and the "countdown".

I have done something similar with another spreadsheet to provide an overview of how much more I need to reach my initial estimates for RE. I have the total amount I want to have for FIRE, my current savings and the remaining balance. In addition, I have it broken down by each year with the targeted amount of savings to set aside each year.

In addition, it lists my total savings and the withdrawals in retirement for each year of my expected retirement. This was a spreadsheet I created using advice received over at REHP. It is pretty crude but it gives me a snapshot of how far I have to go.

dt

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Author: SloanT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 5:24 PM
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Matt:At what age in life did you (and your spouse) achieve a net worth equal to that of your household income?

In The Complete Idiot's Guide to Getting Rich by Larry Waschka the author lays out the three stages of wealth. I loaned my copy out, so I may be butchering this, but I believe this is how it went:

Stage 1: You spend less than you earn and save the difference. You are accumulating wealth.

Stage 2: Your savings appreciates in value (not including new contributions) an equal or greater amount than what you contribute. i.e. You have a $100,000 port earning 10% and your annual savings are $9000. Your port is appreciating by more than what you are saving, and if you wanted you could stop saving so much.

Stage 3: Your savings appreciate in value an equal or greater amount than your annual income. At this point you are essentially FI without the safety net of 25x spending.

I like to use these three guides to gauge my progress on the road to FIRE. So far I am still in stage 1, but I am working on getting to stage 2. I estimate it will be another 5 years or so. One of the funny things about a high savings rate and assuming that spending increases with inflation and not with salary is that I will likely achieve Stage 3 at the same time I hit stage 2. According to intercst's spreadsheet I will save more than I spend in four years and then it's just another year after that before my port will appreciate more than I spend.

By the way, I recommend 'Guide to getting Rich.' It's not anything earth-shattering for anyone who is personal finance savvy, but I recommend it for anyone who is trying to learn more on the subject. If you'll look next time you go to a half price books, they're impossible find, unlike most 'idiot's guide' books. Good stuff.

st

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 355 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 5:51 PM
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SloanT wrote,

Stage 1: You spend less than you earn and save the difference. You are accumulating wealth.

Stage 2: Your savings appreciates in value (not including new contributions) an equal or greater amount than what you contribute. i.e. You have a $100,000 port earning 10% and your annual savings are $9000. Your port is appreciating by more than what you are saving, and if you wanted you could stop saving so much.

Stage 3: Your savings appreciate in value an equal or greater amount than your annual income. At this point you are essentially FI without the safety net of 25x spending.


I like this staged approach as well. Likewise, I am still in Stage 1 and will need to evaluate the timeframe for me to reach Stage 2. I believe I have the same spreadsheet that you mentioned from intercst and will have to look to see when Stage 2 and Stage 3 will occur.

Thanks for the book reference and the information. I'll have to try my luck at the library and see if they have it. Our local library is pretty dinky so I may strike out there.

dt

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 356 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 7:18 PM
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matt5: "After reading the Millionaire Next Door three times ( I currently own 5 copies and give them as gifts to friends and family when they graduate from high school/college) it had a profound impact on my life."

While I liked TMND, I found much of it to be descriptive rather than prescriptive.

"At what age in life did you (and your spouse) achieve a net worth equal to that of your household income?"

Cross the threshhold initially or cross the threshhold and remain above it without exception?

Under the first scenario, I am sure that I did it in my late teens before I started paying for my secondary education. If you mean the latter, than I am sure that it is at least a decade later.

"Now, what's amazing about this formula is that it has ABSOLUTELY NOTHING to do with your income, career or starting net worth. If you make $200,000 per year imagine how long it will take you to build up a net worth equal to that amount."

I disagree (at least WRT to second alternative I posited above). First year private practive doctor with 100k+ in student loans, little in hard assets except clothes and some furniture, and signficant income versus similar person whose parents paid for school, versus similar person who went to lawschool and started receiving large salary much earlier (3 years law school to 4 years for med school + internship + residency).

Here's an even neater concept I love sharing with co-ops/interns/recent grads in our office:

"If you stick 15% of your salary per year under the mattress you will have saved up an ENTIRE YEAR'S salary in 6 years, 8 months. Plus, you will be accustomed to living off 85% of your income (from saving 15% per year). So, in theory, you could quit your job for a year at age 29 (assuming graduating at age 22) and have a BETTER lifestyle" for one or two years "than to which you are accustomed (you'll have saved up 100% of your income, but you're used to living off 85%, remember?)."

"Now, here's where it gets really fun:

-invest it in stocks with a 9% annual return"


stocks have more than a little volatility

"-get a raise at any point during those 6 years, 8 months
-have a company that matches your contribution in any way

...and you can very easily reduce that build-up-a-year-of-income goal to a mere 4 or 5 years. Of course, in a retirement account you can't touch it until until 59 ½ or thereabouts, but you get my point."


Actually SEPPs allow access without penalty substanitally long before 59 1/2 (as another posted has already noted).

Regards, JAFO




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Author: monica3674 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 357 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 9:53 PM
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dt writes:
Our local library is pretty dinky so I may strike out there.


FYI - my mom works at the local library and there are these two programs that you can use to get library books from other libraries. In my area (suburb of Detroit, MI), they "inter-loan" books from local libraries and use the MILE program to get books from further away. My husband uses MILE all of the time and gets really, really rare books from universities and stuff.

Ask the reference librarian at your library about this!

Monica

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 358 of 5069
Subject: Re: FIRE checker for Fools Date: 8/13/2003 11:16 PM
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Monica wrote,

FYI - my mom works at the local library and there are these two programs that you can use to get library books from other libraries. In my area (suburb of Detroit, MI), they "inter-loan" books from local libraries and use the MILE program to get books from further away. My husband uses MILE all of the time and gets really, really rare books from universities and stuff.

Ask the reference librarian at your library about this!


Thanks for that great idea! I vaguely remember that feature of libraries now that you mention it but had completely forgotten about it. Maybe I will make Sunday my library day and go with a list of a few books I have been wanting.

Other than that, I still have an old library card from the town I used to live in with much larger/nicer libraries so I can try there. My parents still live in that town so I can register under their address if I need to renew my card.

Thanks again for the suggestion!

dt

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Author: Ranma One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 361 of 5069
Subject: Re: FIRE checker for Fools Date: 8/14/2003 1:36 AM
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At what age in life did you (and your spouse) achieve a net worth equal to that of your household income?

Assuming current income, I hit that when I was 26. I'm 30 now and have been able to stay above that mark.

This formula would be more useful if it could incorporate age somehow. TMND's formula of (age / 10) x annual income for determining wealth accumulation has age in it, but is flawed at the early and late stages of a working life.

Ranma


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Author: rainphakir Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 363 of 5069
Subject: Re: FIRE checker for Fools Date: 8/14/2003 8:48 AM
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well, I was a student for many years, but when I finally got outta school, I crossed that line in about 5 years. At that point my 'wealth' jumped markedly. I used part of my savings to build a house. I had a property with a 'garage' on it. I tripled the size and converted that into a house. I did a large part of the work myself.

Building the house is THE best thing I've ever done. The sense of accomplishment cannot be beat, nor the self-confidence of having done it. I had never built anything before - but I did spend one summer as an electrician's helper, which gave me the confidence to tackle the electrical wiring. A plumber friend helped me plan the plumbing. I read books and drew plans for the framing, doors, windows, and finishing work.

The effect of the house on my 'wealth' is/was secondary to the internal self confidence and accomplishment.

ralph

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Author: DrZenRoot Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 366 of 5069
Subject: Re: FIRE checker for Fools Date: 8/14/2003 9:50 AM
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Building the house is THE best thing I've ever done

DW and I built our house ourselves, too. Actually, we subcontracted most of the work ourselves and did all the finish work with our own hands. We have about $60K in sweat equity that helped us build a lot of wealth relatively quickly. Also, we learned a ton and the sense of accomplishment would be hard to match.
Don

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Author: ksgrothe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 394 of 5069
Subject: Re: FIRE checker for Fools Date: 8/14/2003 6:07 PM
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I haven't read this board much and probably am not on the road to being FIRE yet. I found this thread when I read the original post which is the post of the day today. Anyway, I found all your stories of wealth accumulation interesting and am astonished that you all seem to have accumulated so much wealth at such young ages. (FYI, I am 32.)

What I am wondering is how many of you have kids. I feel like I am at a disadvantage in accumulating wealth because I had kids at a (fairly) young age. (I won't go into how little about money management/saving I learned from my parents.)

I own the book The Millionaire Next Door but have not read it yet. Perhaps I should make the time to do so.

Karen

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 395 of 5069
Subject: Re: FIRE checker for Fools Date: 8/14/2003 6:12 PM
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What I am wondering is how many of you have kids. I feel like I am at a disadvantage in accumulating wealth because I had kids at a (fairly) young age. (I won't go into how little about money management/saving I learned from my parents.)

I own the book The Millionaire Next Door but have not read it yet. Perhaps I should make the time to do so.


Karen, I am 27 (will be 28 in about a month) and am married with two kids. My kids are 4 (he will turn 5 about a month after my BD) and 2. My wife is a SAHM so I am the only wage earner in our family.

Within the last few years we paid off all of our credit card debt and now our remaining debt (mortgage, student loans, vehicle) is all at relatively low interest rates. As such, we have now been able to focus more on our plan for saving and investing. In addition, last year I was presented with an outstanding opportunity at a new job that has essentially doubled my salary. That has helped tremendously!

I recommend reading the book. I also have a copy but am planning to re-read it as it has been awhile. There are some good principles in the book and it can open your eyes to some new things.

I am quite a way from FIRE but we are working on our plan and making steps towards our goals every day! Join us and share your thoughts, concerns, and experiences!

dt

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Author: FoolStreet Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 399 of 5069
Subject: Re: FIRE checker for Fools Date: 8/14/2003 11:47 PM
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My DH and I also hit the net worth = income goal at 27 (we're 29 now). It's really kind of amazing how quickly your net worth can grow if you save and LBYM! Right now our gross household income is approx $110k and our net worth was $232k in July. Every 401k contribution and mortgage payment helps!

my hats off to you!

you should be profiled in Money Magazine. ...better yet, why not post on the board how you got here and what your plans are...



I'll be 30 next month and I think we hit the Net Worth=Gross Salary sometime last year or slightly earlier, but not much.



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Author: FoolStreet Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 400 of 5069
Subject: Re: FIRE checker for Fools Date: 8/14/2003 11:57 PM
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I'm 33 now and still have a net worth above my current income. Now my goal is to get my net worth to twice my income!

wow, doesn't that feel a little scary/weird? am i the only one who thinks that's such a huge step?

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Author: FoolStreet Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 401 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 12:08 AM
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Stage 1: You spend less than you earn and save the difference. You are accumulating wealth.

Stage 2: Your savings appreciates in value (not including new contributions) an equal or greater amount than what you contribute. i.e. You have a $100,000 port earning 10% and your annual savings are $9000. Your port is appreciating by more than what you are saving, and if you wanted you could stop saving so much.

Stage 3: Your savings appreciate in value an equal or greater amount than your annual income. At this point you are essentially FI without the safety net of 25x spending.



that's so cool, st. thank you for posting. i had never really thought about it that way. i checked my 401k just to see what the heck and sure enough, I'm at Stage 2 (for the 401k only, not the other accounts)

YTD Contributions $8,969.40

YTD Gains/Losses $8,246.45

Of course, there's no way i'm going to extrapolate anything from these #s' this year and last have been just too kooky.






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Author: ksgrothe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 403 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 3:53 AM
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I am quite a way from FIRE but we are working on our plan and making steps towards our goals every day! Join us and share your thoughts, concerns, and experiences!

Thanks for the invitation, dt. I have seen your posts on other boards and thought that you were older (at least older than me!) because of the good advice/suggestions you seem to always give.

I'm not sure I have much to contribute to this board as I don't feel like I have a plan to get to FIRE, nor any plan for retirement at all. Right now my concentration is on getting out of debt and achieving a positive net worth.

I was married and had my first son at age 20. I had only completed one year of college and wanted to finish my engineering degree so that I could get a better job than what I seemed to be able to find without a degree. So when my son was 7 months old and my husband was in his second year of graduate school earning a paltry stipend, I took out some loans to go back to school. It took me 3.5 years to finish, and it was a struggle financially -- I finished with 30K+ in student loans and some credit card debt (although I don't remember exactly how much). Started a new job the month after finishing my degree, and bought a new-to-me car to drive to work. (We had only had one car up to that point.) From that point on, I always made more money than my husband. We never seemed to get that credit card debt paid off, and I'm still paying on the student loans, although they've been consolidated at a very low rate (5% or less). About 2.5 years later, my husband was planning to finish his doctorate and took a post-doc position at UCLA, so we moved to Southern California. This is when the trouble really started. First, my husband never finished his doctorate and his position at UCLA became a staff researcher position which does not have much upward mobility (nor adequate pay). Second, the cost of living in SoCal is quite high, and we've been living above our means. Third, our second son was born about a year after we moved out here -- and since we could not pay the rent if I didn't continue working (since I was still the higher wage-earner), full-time child care costs were added to our expenses. Now, my husband has left me and is in the process of filing for divorce, and I am trying to avoid being stuck with $35K-$40K of debt in my name (half of which is my student loans that I'm still paying on).

So, that's my story, and why I'm not sure I can really call myself a FIRE Wannabee (although I really would like to be able to retire early, as there are so many places I would like to see that I just don't have the time/funds to see now).

Karen

P.S. Before you all recommend it, yes, I have been frequenting the Consumer Credit/Credit Card, Budgeting, and LBYM discussion boards.


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Author: phantomdiver Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 404 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 6:52 AM
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I'm 33 now and still have a net worth above my current income. Now my goal is to get my net worth to twice my income!

wow, doesn't that feel a little scary/weird?

Seems like a great goal to me. And think how wonderful it will feel when it's achieved!

phantomdiver

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Author: Lurker1999 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 415 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 10:44 AM
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Also shocking--> the impression I got from the book is that doctors and lawyers statistically have the odds stacked against them of achieving great wealth. This is due to their expected high lifestyle and status artifacts they are expected to own. The more I think about this, my son's pediatrician is probably only in her 30s and she drives a Lexus. Good luck, becoming a FIRE.

Actually it's not due to any type of lifestyle but rather the fact that after 4 years of college, 4 years of med school, 3-5 years of residency and 1-4 years of subspecialty training without substantial pay, having to pay off student loans there is a late start. That is the primary deficit since you lose many years of compounding and start with a significant negative net worth.

Most doctors aren't single-mindedly trying to retire early, there's easier ways to make a living if that's your entire life's plan.

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Author: SloanT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 416 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 10:54 AM
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Karen: So, that's my story, and why I'm not sure I can really call myself a FIRE Wannabee (although I really would like to be able to retire early, as there are so many places I would like to see that I just don't have the time/funds to see now).

I think you already have everything you need to be a FIRE Wannabe – a good attitude is all it takes. My parents divorced in high school and although we spent money like mad (and my dad made quite a bit), my family had very little in the way of savings. Post-divorce life was a big adjustment for my mom, both emotionally and financially. Consider yourself lucky to have an education and the ability to support yourself. My mother had to finish her education (after a 24 year lapse) and work part-time during and after the divorce. Add to that the emotional damage (they had been married 24 years, there was a 3 year affair…) and she had a rough time of it.

So, in short, I feel your pain. Based on my experience here is my advice: Become a budget queen. Also, as much as it will feel weird to not put away anything for the future I think the psychological benefit of getting out of debt is greater than the potential financial rewards of saving while you try to get free. Also, your kids will be far better served by having you around and sane and so cut out all the extras that you want to provide for your kids but they don't really need. If the cut in spending means you can work less then so much the better. I can't stress this enough. My mom spent more and worked more than she should have because she didn't want my brother and my lives to change. Hell, we would have dropped cable in an instant if we knew what it would mean to the budget. Your kids will be happy to share the burden.

One last thing: I hear of many women (my mom included) who didn't get the cut they wanted (or deserved) because they just wanted the divorce to be over with. I think you should work to get everything you deserve (or make him take what he deserves) right up to the point where it would lead to court. You don't want to go there if you can avoid it, but don't get shafted because you are in a rush to move on.

Keep going, it will get better. Just start that excel spreadsheet out and celebrate every month as your debt goes down. You're on the right path!

st


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Author: Eldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 423 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 1:37 PM
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Sounds like a race to the bottom to me, will corporations keep moving shop in search of the cheapest labor at all costs? Its no wonder I can't get any consumer products made by US labor.

If you stick 15% of your salary per year under the mattress you will have saved up an ENTIRE YEAR'S salary in 6 years, 8 months.


First, I really loved the post and thought you hit some very important points.

That said, I'm in my late 30's, have been saving 10% to 15%+ of my pay since I started working at about the age of 20, and have yet to get my net worth up to my annual gross (well, if you count furniture, cars, etc. we're there, I'm just looking at financial investments).

Why? Because my income keeps growing - and took a pretty substantial jump upward when I finished grad school. So when I saved 10% to 15% of my pay when I was an undergrad student, it really doesn't do much (but a whole lot more than nothing! Don't get me wrong) to get our net worth up to our current gross income.

Why do I bring this up? Just to lend some encouragement to some folks who might be saying, "Gee, I'm X years old, and don't have my net worth up to my annual gross income yet" - and feel some sense of dispair. The important thing is that you are living below your means, avoiding debt, and saving and investing.

To look at my net worth and compare it to my annual income would be misleading. Assume two people, each who saves and invests 15% of his income, and they choose the exact same investments with the exact same performance. One person's net income never changes, the other person's grows by 5% per year. Who will take longer to get to that point where net worth = income? Why the person who's salary is growing will be the person who takes longer to get there.

And who would you rather be?

Just a little side note - measures like this are nice, and indeed can be very helpful - but they don't necessarily apply equally well to everyone - so if you don't measure up to somone else's measure, don't fret it. The measure you should be concerned with measuring up to is your own.

And again, just to be clear, I think the post I'm responding to was well-written, contianed great information, and was a pleasure to read - I'm not trying to take exception to anything written, just trying to add just one more perspective.

Regards,

Eldrehad


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Author: decath Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 425 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 1:43 PM
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Karen
What I am wondering is how many of you have kids. I feel like I am at a disadvantage in accumulating wealth because I had kids at a (fairly) young age.

The bad news is "yes, you are at a disadvantage having kids at a young age"! The good news is you can counter that disadvantage. The following points are not exhaustive but cover the main things DW and did during our journey.

- LBYM
- drive used cars
- bring lunch to work
- live in a small but comfortable home
- make kids earn there own spending money when old enough
- refuse to buy the kids cars, make them buy there own, pay for gas, maintenance and insurance. Really, there is no constitional right to having a Mustang at age 16.
- Saving for retirement takes presidence to saving for college. They have many other ways to pay for it. You have only one resource for saving for your retirement, YOU! If your pumping in 20% - 30% into FIRE funds and have some left over for college then fine.
- camping vacations
- did home repairs myself. Made mistakes but learned on the way
- DW was great at finding bargains to cut costs for food, clothing and miscellanious items (read garage sales).

My wife and I had our 1st when I was 21 and our 2nd when I was 23. I've been there and applied the above so I could accumulate a decent net worth. Nobody suffered but we did low-budget fun things. I'm 41 now and anticipate FIRE around the age of 50.

(I won't go into how little about money management/saving I learned from my parents.)

I own the book The Millionaire Next Door but have not read it yet. Perhaps I should make the time to do so.


Reading TMND is a great start! It will help you over-come what you did not learn from your parents, rather quickly I might add! <grin>

Good luck and God Speed!

decath


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Author: SloanT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 426 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 1:48 PM
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Eldrehad:And again, just to be clear, I think the post I'm responding to was well-written, contianed great information, and was a pleasure to read - I'm not trying to take exception to anything written, just trying to add just one more perspective.

I was wondering when you would make it over here. I thought I was going to have to track you down and send you an e-mail... ;)

What did you think of the 'stages of wealth' approach? I like the approach above as a yardstick but I think the stages give a good idea of when you will reach FIRE. Both good measurements, they just measure different things...

st

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Author: Eldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 430 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 2:47 PM
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What did you think of the 'stages of wealth' approach?

I haven't read too many posts here yet... can you perhaps provide a link?

Thanks.

Regards,

Eldrehad


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Author: SloanT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 431 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 3:08 PM
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E:can you perhaps provide a link?

Here you go:
http://fireboards.fool.com/Message.asp?mid=19453835

Enjoy!

st

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Author: Eldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 437 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 3:43 PM
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What did you think of the 'stages of wealth' approach? I like the approach above as a yardstick but I think the stages give a good idea of when you will reach FIRE. Both good measurements, they just measure different things...

First, thanks for the link.

I agree that the stages of wealth approach is indeed a good measure, and will give some indication of when one will reach FIRE - and I am not yet to the point where my investment returns exceed my income, but I'm working on it.

I'd have just about an identical reservation with regard to this measure as I did with regard to the other one we discussed (the net worth = annual income crossover).

Again, with this approach as well, if you take two people who save the same percentage of their incomes, and have identicial investment returns, the person whose income grows faster will actually take longer to reach these milestones than the person whose income grows more slowly.

I guess what I'm leading toward here is the idea that I don't like any 'universal' percent savings figure - like the 'magic' 10% or 15% you hear bandied about in the financial media or many financial self-help books. Don't get me wrong, these percent figures have their purpose - and reading about them got me started along the path of saving and investing - and whatever gets you started is a good thing.

I would caution people, however, that no single measure fits all circumstances. Take the figure of investing 15% of income toward retirement as an example. Take two people, one whose income grows over time, and one whose does not.

Sure... the person whose income grows will put more and more money into savings every year, as he's saving 15% of an ever growing income - whereas the person whose income never changes always contributes the same amount.

But assuming equivalent investment returns, which one of these two investors, come retirement day, will have the larger nest egg relative to his pre-retirement income?

The person whose income never grew... that's who.

So, having a target figure of 10% or 15% or whatever % savings and investment is a great starting point... and a heck of a lot better than not saving at all... and if that will get you to your goal, that's fantastic.

But if your goal is to have a retirement fund that will spin off, for example, 80% of your pre-retirement income, and you contribute a fixed percentage of your income (say 10% or 15% or whatever) as you go along, and your income keeps rising, you might be in for a surprise.

Yes, as your income grows you'll be contributing more with this method... but in order to catch up to they guy whose income never grows (in terms of nest egg size vs. pre-retirement income) you have to actually increase not only the amount you save, but also the percentage of your income you save.

Regards,

Eldrehad



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Author: matt5 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 438 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 5:03 PM
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Eldrehad,

Thanks for complimenting my post and, yes, I agree with you that there isn't a formula to fit everyone into one "bucket" - different people have different realistic goals. Never in my wildest dreams did I imagine my post getting 38 replies to it! For being around only 2 weeks, this FIRE board is really burning it up - pardon the pun.


Matt



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Author: Eldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 439 of 5069
Subject: Re: FIRE checker for Fools Date: 8/15/2003 5:27 PM
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Thanks for complimenting my post....

Just calling 'em like I see 'em. :-)

I agree with you that there isn't a formula to fit everyone into one "bucket" - different people have different realistic goals. Never in my wildest dreams did I imagine my post getting 38 replies to it! For being around only 2 weeks, this FIRE board is really burning it up - pardon the pun.

Let's hope it always maintains the spirit it is starting out with. Some of the other boards (not mentioning names) have had the tendency to turn into nothing more than insult-hurling shouting matches once they become too popular.

That's fine over on PA (and I've shouted there once or twice myself, but it's par for the course there - though I do try to refrain from the personal insult), but I hope it never plagues this board.

Regards,

Eldrehad




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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 475 of 5069
Subject: Re: FIRE checker for Fools Date: 8/18/2003 2:35 PM
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Thanks for the invitation, dt. I have seen your posts on other boards and thought that you were older (at least older than me!) because of the good advice/suggestions you seem to always give.

Thank you very much! It is very rewarding to hear that others on these boards have found some value in things that I have shared. Throughout my time on the Fool, I have gone through the stages of being a newbie to a particular topic and then learning more and being able to share what I have learned.

I'm not sure I have much to contribute to this board as I don't feel like I have a plan to get to FIRE, nor any plan for retirement at all. Right now my concentration is on getting out of debt and achieving a positive net worth.

That is what this board is here for in my opinion. We are all at various stages on the path to FIRE. Some of us are just beginning and others are already there. By people asking questions, it allows all of us to learn new things and continue to foster our growth.

...go back to school. It took me 3.5 years to finish...bought a new-to-me car to drive to work...This is when the trouble really started...the cost of living in SoCal is quite high, and we've been living above our means

These excerpts indicate to me that you are on the right path. You have recognized where certain mistakes were made and throughout the process you have done things to improve your situation. I commend you for being able to finish school while raising a child and maintaining the household. In addition, you are aware of the problems that you are facing, which is a big part of the battle.

Now, my husband has left me and is in the process of filing for divorce, and I am trying to avoid being stuck with $35K-$40K of debt in my name (half of which is my student loans that I'm still paying on).

{{{{karen}}}}

So, that's my story, and why I'm not sure I can really call myself a FIRE Wannabee (although I really would like to be able to retire early, as there are so many places I would like to see that I just don't have the time/funds to see now).

That's what being a FIRE Wannabee is all about. Over time, you will learn quite a few things on the boards here and there are plenty of very knowledgable and helpful people that can help along the way.

Please continue to ask questions and learn new things along with the rest of us!

dt

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Author: vickifool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 496 of 5069
Subject: Re: FIRE checker for Fools Date: 8/20/2003 1:37 PM
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What I am wondering is how many of you have kids. I feel like I am at a disadvantage in accumulating wealth because I had kids at a (fairly) young age.

I've got kids. There are lots of ways to raise children inexpensively. Read the Tightwad Gazette for ideas. My Dad taught me a lot about money management by being a bad example.

I've got to run right now, but remind me and I'll share some of my moneysaving kid tips later, ok?

Vickifool

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Author: paradigm100 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 507 of 5069
Subject: Re: FIRE checker for Fools Date: 8/21/2003 1:23 PM
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"My DH and I also hit the net worth = income goal at 27 (we're 29 now)"

I never thought of it this way. I guess my net worth = my income last year when I was 25.

I just turned 26 last month. I started saving into my IRA since I was 19 at about $166 - $200 a month. I bought my first house when I was 23, and did improvements like finished the basement and landscaping without hiring contractors for even higher equity.

I guess I can thank my parents for putting in the idea of how important putting investments into action was for me.

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Author: justpatrick Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 508 of 5069
Subject: Re: FIRE checker for Fools Date: 8/21/2003 2:46 PM
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One thing is that I think you should look at not only net worth to income, but also net worth to expenses. The first number does give you an idea of how good you are at saving relative to your income (minus gifts and such). The second tells you how far from retirement you are...which is a key difference.

Also, be careful how you measure your "success." If you are making $150k (married, two incomes) and one of you stops working. Now your income has dropped dramatically, but your net worth remains the same. This metric of net worth to net income goes way up, but you are no closer to retiring than you were before.

The other thing is that I feel strongly that working on good offense (higher income) can have a much more dramatic effect than just cutting costs alone.

How to get there early and how to build from there is probably worthy of another post/thread.

justpatrick


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Author: Dhahran74 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 524 of 5069
Subject: Re: FIRE checker for Fools Date: 8/21/2003 8:29 PM
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Was anyone watching "American Masters" the other night, when they compared directors Selznik and Hitchcock? See information on this episode at http://www.pbs.org/previews/Hitchcock - it was entitled "Hitchcock, Selznick and the End of Hollywood", although they concluded by saying that the predicted end of Hollywood did not occur.
Yeah, I know, "Selznik Who?"... He did "Gone with the Wind." But David O. Selnik was credited with bringing British director Alfred Hitchcock to Hollywood. Hitchcock's lasting success vs. Selnik's decline into obscurity reminded me of some of the principals put forth in the two "Millionaire" books:
-Hitchcock's marriage and lifelong devotion to a supportive wife, vs. Selznik's failure to remain faithful to his first wife.
-Hitchcock's working class roots vs. Selznik's family wealth and extravagant lifestyle.
-Hitchcock's creativity and his willingness to experiment with the camera. Calculated risk-taking led to his success, which brought prestige and importance to the function of director.

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Author: Stetson20 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 606 of 5069
Subject: Re: FIRE checker for Fools Date: 8/31/2003 7:35 PM
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This was a spreadsheet I created using advice received over at REHP

What is REHP? Sorry if it's been defined here before.

Also, I'd just like to say that I'm mildly depressed now. If not for my emotional decision 13 years ago to marry someone who's definitely not Foolish, I'd have achieved a high net worth by now. I will overcome..

Stetson20



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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 609 of 5069
Subject: Re: FIRE checker for Fools Date: 9/1/2003 12:06 AM
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Stetson wrote,

What is REHP? Sorry if it's been defined here before.

REHP stands for Retire Early Home Page. There is a message board here at the Fool and a website run by one of the posters of that board.

http://boards.fool.com/messages.asp?mid=19521895&bid=112992
http://www.retireearlyhomepage.com/

Also, I'd just like to say that I'm mildly depressed now. If not for my emotional decision 13 years ago to marry someone who's definitely not Foolish, I'd have achieved a high net worth by now. I will overcome..

My sympathy is with you in that aspect. My DW has not been onboard with all of my goals and it has been a struggle. However, she has been getting better and better and starting to work together with me towards goals that we have established. I wish you nothing but the best because I know what those struggles can be like.

dt

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Author: foolkath Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 792 of 5069
Subject: Re: FIRE checker for Fools Date: 9/19/2003 9:50 AM
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<<I just turned 26 last month. I started saving into my IRA since I was 19 at about $166 - $200 a month. >>

Paradigm 100: My son is now 19 and he is doing the same thing. May I ask what the value is now? ( to encourage him) And what is it that you invest it in? Any other reccomendations for my 19 yo son, regarding saving for FIRE in an IRA?

Thanks

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